Local governments have considerable influence on access to adequate and affordable housing through their control over land-use regulations such as zoning. Some localities leverage this control to constrain housing production, often making it difficult to build new homes in neighborhoods that are within a reasonable distance of jobs and well-funded public services. This results in segregated metropolitan areas, higher housing prices, and fewer dwelling options for families with low incomes and people of color. We show that a cohort of the nation’s most exclusionary cities and towns—those that have added the least new housing over the past two decades—have overly restrictive land-use rules that make building anything other than single-family homes difficult. We review their budgets to show that many of these municipalities also heavily rely on revenues sourced from higher-level governments. These findings suggest many opportunities to leverage those revenues to influence local policies. The federal government or states could condition intergovernmental grant funds as “carrots” or “sticks” against exclusionary municipalities to promote better land-use policy.
Exclusionary cities restrict housing construction through strict zoning policies
The cost of housing has increased rapidly over the past several decades, exposing many people with low and moderate incomes to high housing cost burdens. One major explanation for these increased costs has been a general decline in housing production in many cities throughout the United States over the past few decades. Although housing construction has recently increased, it remains inadequate to meet the dwelling needs of a growing nation. Housing affordability can vary significantly within metropolitan areas, reducing access to residents in communities with a high quality of life, well-funded public services, and access to employment. Some jurisdictions have residents and policymakers who are particularly hostile to new housing construction, and many municipalities enforce this point of view through strict land-use regulations that prevent the construction of multifamily housing. By maintaining communities that are largely composed of only single-family homes, public services funded by local property taxes can be “hoarded,” metropolitan areas can be segregated by race and class, and people unable to afford living in these places can be denied access to higher-quality schools and jobs.
In this paper, we conduct case studies of eight municipalities that exhibit particularly exclusionary tendencies. Each is located in a growing metropolitan area and features housing values significantly higher than the regional average, both indicating significant demand. Yet each of the case-study cities—located in California, Florida, Michigan, New York, Ohio, and Texas—has allowed housing unit growth at a much lower level than their neighbors. They also have few subsidized affordable housing units and have residents who, compared with the surrounding areas, have higher incomes and are more likely to be white.
Our research shows that all of the case-study exclusionary cities have considerably more restrictive zoning policies than the nearby central city as well as other nearby cities. Each uses land-use regulations that limit more than 75 percent of residential land to only allow single-family homes. And none of the cities allows three-or-more-unit buildings to be constructed on more than 25 percent of its land.
Figure O.1 Exclusionary Cities Devote a Higher Share of Land to Single-Family Homes than Nearby Central Cities
The potential to use state and federal grant policy to influence outcomes
We examined the degree to which each of the case–study cities receive intergovernmental transfers from county, state, and federal governments. We found that these transfers constituted the second–largest source of revenue after property taxes for five of the eight municipalities. In some cases, such as Calabasas, California, these transfers represented a significantly higher share of revenues than the nearby central city or other cities in the surrounding region. In other cases, such as in Palm Beach, Florida, and University Park, Texas, these transfers played an insignificant role in the municipal budget.
Figure O.2 Intergovernmental Support Represents a Major Share of General Fund Revenues in Some Exclusionary Municipalities
These transfers were a combination of tax-formula revenue and grant awards from county, state, and federal governments. Funds supported a combination of nine types of projects: affordable housing, environmental protections, transportation (including road maintenance, highways, and transit), water (including stormwater and sewage), police/fire, public defense, COVID-19 pandemic relief, capital improvement projects, and health projects. While not all these funds were directly related to housing, some were indirectly connected in ways that allowed states and the federal government to exercise leverage, including funds for transportation, capital improvements, or response to the COVID-19 pandemic.
Why this matters
Most exclusionary cities do appear to be using land–use policies to prevent housing construction. States and the federal government have a rationale for encouraging or requiring those cities to alter these policies because they are contributing to the national housing shortage. In addition, some of those cities rely to a considerable degree on funds transferred to them from higher-level governments.
Conditional grants on implementing more equitable land-use regulations could thus be an effective strategy to address inadequate housing production in some communities. But more strategies are necessary to address the full breadth of exclusion in municipalities around the country because some cities receive almost no pass-through dollars.